[cia-drugs] Fw: [GATA] Fines for market rigging are tiny fraction of its profits

[Vigilius Haufniensis]

- Original Message - 
From: Gold Anti-Trust Action Committee 
To: [EMAIL PROTECTED] 
Sent: Friday, March 16, 2007 11:08 PM
Subject: [GATA] Fines for market rigging are tiny fraction of its profits


  Fines for market rigging are tiny fraction of its profits  

Submitted by cpowell on 09:08PM ET Friday, March 16, 2007. Section: Daily 
Dispatches 
SEC Allows Auction-Rate
Manipulation With Disclosure

By Darrell Preston
Bloomberg News Service
Friday, March 16, 2007

http://www.bloomberg.com/apps/news?pid=20601103&sid=amVIyWQRrnkI&refer=n...

The Securities and Exchange Commission, after sanctioning Wall Street's biggest 
financial institutions for misdeeds in the $260 billion auction-rate market, 
now lets the same firms manipulate investor purchases as long as they disclose 
their intentions. 

Citigroup Inc., Bank of America Corp., and 13 more investment banks get inside 
knowledge of bids when they run auctions to set the interest rates on the 
securities. They can use the information to put in their own bids and influence 
the outcome, even after paying a $13 million fine to settle SEC claims about 
the practices last May. 

The difference now is banks have to tell investors that they use inside 
information with a notice like this one by Goldman Sachs Group Inc.: "When we 
submit an order for our own account, we are likely to have an advantage over 
other bidders because we will have knowledge of some or all of the other orders 
placed through us." 

The disclosures have safeguarded $650 million in fees that Thomson Financial 
data show the industry reaps each year from selling the securities, corporate 
or municipal debt with interest rates reset periodically through auctions. The 
control that dealers exercise over the market may force issuers to pay higher 
yields or leave investors with lower returns. 

"You make your point, you collect your money, and everyone goes on as they were 
before," said Richard Lehmann, a registered investment adviser in Miami Lakes, 
Florida, and president of Income Securities Advisors Inc., regarding the SEC's 
action. "That's the way a lot of compliance is."

SEC Chairman Christopher Cox, a former Republican congressman from California 
appointed by President George W. Bush, declined to respond to several requests 
for comment. 

Commissioner Paul Atkins, a Republican, had no comment, according to Hester 
Peirce, a member of his staff. 

The three other commissioners -- Roel Campos and Annette Nazareth, both 
Democrats, and Kathleen Casey, a Republican -- didn't respond to telephone and 
e-mail messages seeking comment. 

SEC spokesman John Nester said in an e-mail that the SEC's decision last year 
"speaks for itself." 

Citigroup, Goldman, and the other brokerages settled claims they broke laws 
prohibiting omissions or misstatements in the sale of securities. The firms 
didn't admit or deny wrongdoing in the settlements. 

The SEC's May 31 press release describing its cease-and-desist order says "each 
firm engaged in one or more practices that were not adequately disclosed to 
investors, which constituted violations of the securities laws," including 
"allowing customers to submit or change orders after auction deadlines"; 
"having an express or tacit understanding to provide certain customers with 
higher returns than the auction clearing rate," and "providing certain 
customers with information that gave them an advantage over other customers in 
determining what rate to bid." 

Nester said in his e-mail that the order "did not find rigging, nor was rigging 
alleged." 

Paul Kanjorski, a Pennsylvania Democrat who chairs the House Subcommittee on 
Capital Markets, Insurance and Government Sponsored Enterprises, said he plans 
to bring up the matter with House Financial Services Committee Chairman Barney 
Frank, a Massachusetts Democrat. 

"I certainly will look at it, and where it's possible to have the regulator 
perform up to standards, I'd certainly rather do that then getting involved 
legislatively," Kanjorski said in an interview. "But certainly we have 
requirements of oversight and it's an issue that we should take up. We have to 
see if it constitutes some conflict of interest or violates some law."

Rates on auction-rate securities are reset every seven, 28, or 35 days via 
so-called Dutch auctions, at which investors submit the yield they are willing 
to accept to hold the debt. The lowest yield necessary to place all the bonds 
becomes the rate on the securities until the next auction. 

SEC officials have said the auction-rate securities market is misnamed. "The 
method by which rates are set for auction- rate securities bears little 
resemblance to a pure Dutch auction process," said Martha Haines, the SEC's 
head of public finance regulation and the official in charge of market 
regulation for the municipal bond market. "There is nothing wrong with that so 
long as it is fully disclosed."

Haines, in a speech to a municipal bond industry

Re: [cia-drugs] Fw: [GATA] Fines for market rigging are tiny fraction of its profits

[Max Robinson]

Same thing for chemical spills.

Vigilius Haufniensis wrote:


 
- Original Message -

*From:* Gold Anti-Trust Action Committee 
*To:* [EMAIL PROTECTED] 
*Sent:* Friday, March 16, 2007 11:08 PM
*Subject:* [GATA] Fines for market rigging are tiny fraction of its 
profits